Tax and accounting calendar
Some important tax and accounting dates in the week ahead:
Wednesday, May 30 • Financial Accounting Standards Board meeting will cover feedback on a proposal regarding real estate investment properties, impairment of indefinite-lived intangible assets and the definition of a nonpublic entity. Norwalk, Connecticut.
Wednesday, May 30 – Friday, June 1 • Government Accounting Standards Board meeting. Norwalk, Connecticut.
Thursday, May 31 • International Conference on Global Capital Markets and Corporate Governance, focused on global standards. Public Company Accounting Oversight Board member Steven B. Harris will speak. Moscow. • USC Leventhal School of Accounting SEC and Financial Reporting Institute Conference. Speakers include PCAOB Chairman Jim Doty, Chief Auditor Marty Baumann, and Claudius Modesti, Director of the Division of Enforcement and Investigations. Pasadena, California.
Thursday, May 31 – Friday, June 1 • Seminar on the federal income taxation of insurance companies and products, co-sponsored by the Federal Bar Association and the IRS Office of Chief Counsel. Speakers include IRS representatives, staff from the House Ways and Means Committee and the Senate Finance Committee and the U.S. Tax Court. Washington.
Friday, June 1 • Hearing on IRS-proposed regulations relating to the purchase of longevity annuity contracts under some tax-qualified plans. 1 p.m., IRS Auditorium. Washington.
Heard in more states: See you in tax court!
(Reuters) – Georgia State Representative Allen Peake owns 20 restaurants and this year he took his frustrations with his tax bills to the state capitol, where he helped push through legislation creating a new state tax court.
“I’ve had several sales tax audits done and disputed them, and never felt I had a fair shake,” said Peake, echoing the views of other business owners.
Before Peake’s bill passed, Georgia taxpayers challenging state tax authorities had to pay disputed taxes before appealing them. Their appeals would be heard by the same Department of Revenue that levied the tax in the first place. And further appeals could be overruled by the revenue commissioner or heard by a judge without tax expertise.
Under the new system, tax appeals will be heard by a tax expert who is independent of Georgia’s Department of Revenue, and taxpayers will not have to pay disputed taxes before appeal.
Six U.S. states have established or considered establishing independent tax tribunals in the last two years, a trend supported by the business community, but one which also is stirring debate about the need for these new tribunals.
In addition to Georgia, Illinois approved a law last year to create a tax court by 2013.
$452 billion tax hike in 2013: Taxmageddon by the numbers
As we wrote last month, 2012 is set up to be a perfect tax storm: a slew of tax breaks are expiring, mandatory spending cuts are looming, and it’s an election year. So rhetoric will be high, hard won compromise on tricky issues will be low.
Not taking action, however, will be costly. This week the OECD said that could lead to an economic slowdown in the U.S. in 2013.
Economist Marty Sullivan has counted up how much taxes will climb if some action isn’t taken and in this Tax.com analysis gives some helpful background on how we got to a $452 billion fiscal precipice.
Sullivan spent time at the U.S. Treasury and Congress’ Joint Committee on Taxation, so he knows how the tax sausage is made and he predicts the post-election lame duck congress, more focused on office moves and next careers than complex tax riddles, will pass a short-term extension of a few months. Basically pushing off the inevitable and giving the incoming session a whopper of a welcome gift.
The expiration of tax breaks like the 2001/2003/2009 tax cuts, as well as the payroll tax cut, estate tax breaks, the R&D tax credit for businesses, combined with the cost of the Patient Protection and Affordable Care Act (“Obamacare”), and other sundry items, will add up to the overall tax increase in 2013 of $451.8 billion.
Over the next decade the cumulative tax jump is $5.8 trillion.
There are four key issues that make this conundrum such a challenge to fix, says Sullivan:
Ireland-bound Eaton is latest to end US corporate citizenship
May 21 (Reuters) – Eaton Corp’s purchase of electrical equipment maker Cooper Industries means another U.S. company will soon leave the United States in favor of relocating its headquarters to a foreign country with sharply lower taxes.
In the case of diversified industrial manufacturer Eaton , a complicated corporate structure will allow it to become part of an Irish corporation and enjoy that country’s low 12.5 percent corporate tax rate.
The top U.S. corporate tax rate is 35 percent, the highest in the world, though few companies actually pay that much due to abundant loopholes that lower their effective rates.
The Eaton-Cooper deal comes as the U.S. Congress inches toward a broad corporate tax code overhaul. The deal could add momentum to that effort, with Republicans arguing that high U.S. tax rates can drive companies to drastic measures.
In what could be a painful drain on the Treasury over time, at least seven U.S. companies in recent months have chosen through acquisition or merger to renounce their U.S. corporate citizenship by relocating to Ireland, the Netherlands, Switzerland or other lower-tax countries.
“There have been more of these in the last two months than in the five years before,” said Bob Willens, an independent tax analyst and publisher of The Willens Report.
The Eaton-Cooper deal will lead to $160 million in annual tax savings for the combined company, even though Eaton in practice already pays far less than 35 percent. That is thanks to its foreign subsidiaries, many of which are already in low-tax countries such as Luxembourg and the Cayman Islands.
David Cay Johnston debates Grover Norquist
Reuter’s tax columnist David Cay Johnston appeared on the most recent episode of Real Time with Bill Maher, on the same panel with anti-tax activist Grover Norquist.
To see the whole show, you have to be a subscriber to HBO or HBO go, but here’s a clip from the “overtime” section of episode 248 including tax commentary, a discussion of J.P. Morgan’s loses, and much more politics both old and new.
Tax and Accounting calendar
Some important tax and accounting dates in the week ahead:
Tuesday, May 8
U.S. Senate Finance Committee hearing considering the nomination of Mark Mazur to be an Assistant Secretary of the Treasury, Matthew Rutherford to be an Assistant Secretary of the Treasury, and Meredith Broadbent to be a member of the United States International Trade Commission, to start at 10 a.m. EDT in Room 215, Dirksen Senate Office Building.
Two subcommittees of the U.S. House Ways and Means Committee joint hearing on tax fraud involving identity theft, to start at 10 a.m. EDT in Room 1100, Longworth House Office Building. Steven Miller, IRS Deputy Commissioner for Services and Enforcement, and Patrick O’Carroll, Social Security Administration Inspector General, will be witnesses, among others.
Tax Analysts, the National Association of Enrolled Agents, and Tax.com roundtable discussion on changes to the rules governing practice before the U.S. Internal Revenue Service. IRS Office of Professional Responsibility Director Karen Hawkins will speak.
Wednesday, May 9
Facebook expects $14 billion tax break from options
When Facebook issued its original prospectus in February we wrote about how the expensing of options would sharply reduce the tech giant’s tax bill in the near future.
Now that it’s closer to IPO time, the company has put out fresh information on the impact its mega-offering will have on the company’s annual bill from Uncle Sam, and it’s even bigger than was thought.
The bottom line is the same: Facebook won’t owe tax this year, and its rate will stay low for years to come.
The reason is that if the stock goes public at the midpoint of the current range of $28 to $35 per share, the Facebook number crunchers, according to the May 3 filings, “estimate that this settlement and option exercise activity by U.S. employees would generate a corporate income tax deduction of approximately $14 billion.”
Without that $14 billion deduction, at the corporate tax rate of 35 percent, Facebook would have had to pay an additional $4.9 billion in taxes that it will now avoid, noted Rebecca Wilkins, senior counsel for Citizens for Tax Justice, which opposes this tax treatment of stock options.
Such a deduction is well over the estimated $3 billion that Senator Carl Levin railed against just weeks after the first filing.
It’s almost certain to well exceed the company’s 2012 taxable income. (Facebook made $1 billion last year). What’s left over will go to other taxes.
Wal-Mart auditor unlikely to suffer in bribery case
The bribery scandal at Wal-Mart Stores Inc’s Mexican unit is unlikely to land the giant retailer’s auditor, Ernst & Young, in hot water if the government’s record on prosecuting such cases is any indicator, academics and other experts said.
Bribery cases brought under the Foreign Corrupt Practices Act are on the rise, but a review of past U.S. government FCPA settlements shows that external advisers, including audit firms, almost never become legal targets.
An investigation by The New York Times published last week alleged a multi-year pattern of bribery of local officials by Wal-Mart’s Mexican operations, followed by a cover-up.
No allegations have been made against Ernst & Young. The U.S. audit firm declined to comment.
Mancera – a Mexican member of E&Y’s global network – is listed as the auditor of Wal-Mart de Mexico and did not respond to a request for comment. Wal-Mart did not respond to a request for comment either, but it has said it is investigating potential issues.
The Securities and Exchange Commission (SEC) and the U.S. Department of Justice have settled 73 FCPA cases since 2007. That is more than double the number settled in the prior three decades. The anti-bribery law was enacted in 1977.
Since 1977, only one settlement involved an audit firm. It was a 2001 case against KPMG’s Indonesian affiliate – KPMG Siddharta Siddharta & Harsono. It was alleged KPMG-SSH staff paid a local tax official to lower the tax bill for a client, a local firm owned by oilfield services group Baker Hughes.
Calendar
Some important tax and accounting dates in the week ahead
Monday, April 30 * The U.S. Internal Revenue Service hearing on limited partnerships and taxpayer participation, to start at 10 a.m. EDT in the IRS Auditorium. * American Institute of Certified Public Accountants (AICPA) three-day conference on investments, auditing and tax questions, compliance fundamentals, internal control, and healthcare reform, Atlanta. U.S. Assistant Secretary of Labor Phyllis Borzi will speak. * AICPA two-day conference on tax strategies for high-income individuals, Belagio Hotel, Las Vegas.
Tuesday, May 1 * The D.C. Bar Taxation Section Real Estate Committee luncheon program, IRS officials Sam Kamyans and Rosty Stiller to speak.
Wednesday, May 2 * AICPA conference on tax controversy, and small business practitioners. Speakers include IRS Office of Professional Responsibility Director Karen Hawkins and Karen Sheely from the IRS Taxpayer Advocate Service, Las Vegas.
Thursday, May 4 * The Hamilton Project of the Brookings Institution forum on the economic context for tax reform and the economic criteria that should be used when evaluating tax reform options, speakers to include former U.S. Treasury secretaries Robert Rubin and Lawrence Summers, among others, Washington Court Hotel, 9:30 a.m. EDT
Sales-tax deal with Texas is Amazon’s latest
(Reuters) – Amazon.com agreed to begin collecting sales tax in Texas on Friday, forging a deal that promises to bring more jobs to the southern U.S. state and as the online marketer lost another round in a series of state-by-state sales tax battles.
The agreement, to take effect on July 1 for Texas’ 6.25-percent sales tax, follows another accord reached with Nevada earlier in the week to begin collecting that state’s 8.1 percent sales tax on January 1, 2014.
Amazon rings up an estimated 20 percent of all U.S. online retail sales, making it the country’s largest online retailer.
Most online purchases are free of sales tax, which has given the company an edge over traditional, bricks-and-mortar retailers that do collect sales tax.
As online sales have grown, and municipal budgets have tightened, states have been pushing hard to capture more e-tail sales tax revenue.
Under federal law, retailers with physical facilities in a state can be forced by the state to collect sales tax on purchases made by a resident of that state. That includes e-tailers with distribution centers. E-tailers without physical facilities in a state need not collect the tax.
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